Bangko Sentral ng Pilipinas said the country’s outstanding external debt (EDT) declined in the second quarter of 2022. The country also recorded a lower external debt to Gross Domestic Product (GDP) ratio of 26.8 percent from 27.5 percent in the previous quarter.
The ratio remains one of the lowest as compared to other Asean member countries. The low EDT to GDP ratio, a solvency indicator, indicates the country’s sustained strong position to service foreign borrowings in the medium to long-term.
Other key external debt indicators also remained at prudent levels. Gross International Reserves (GIR) stood at $100.9 billion as of end-June 2022 and represented 7.3 times cover for short -term (ST) debt based on the original maturity concept.
The debt service ratio (DSR) dropped to 5.0 percent from 9.5 percent recorded for the same period last year due to lower repayments accompanied by higher receipts. The DSR, which relates principal and interest payments (debt service burden) to exports of goods and receipts from services and primary income, is a measure of adequacy of the country’s foreign exchange (FX) earnings to meet maturing obligations.
External debt, which refers to all types of borrowings by Philippine residents from non-residents, stood at $107.7 billion as of end-June 2022, down by $2.1 billion (or 1.9 percent) from the $109.8 billion level as of end-March 2022.
BSP said the decrease in the debt level during the second quarter of 2022 was mainly due to negative FX revaluation of $2.0 billion as the US Dollar strengthened against other currencies amid the Ukraine-Russia conflict and the US Federal Reserve’s recent policy actions to raise interest rates to curb inflation.
The transfer of Philippine debt papers issued offshore of $613 million and net repayments of $86 million further contributed to the decline in the debt level, reducing the effect of prior periods’ adjustments of $598 million.
Year-on-year, the country’s debt stock rose by $6.5 billion. The increase was driven by net availments of $12.5 billion, largely by the National Government and prior periods’ adjustments of $2.8 billion.
Meanwhile, the transfer of Philippine debt papers from non-residents to residents of $5.0 billion as well as the negative FX revaluation of $3.8 billion partially tempered the increase in the debt stock for said period.
As of end-June 2022, the maturity profile of the country’s external debt remained predominantly medium- and long-term (MLT) in nature, with share to total at 87.1 percent. On the other hand, ST accounts comprised the 12.9 percent balance of debt stock and consisted of bank liabilities, trade credits and others. The weighted average maturity for all MLT accounts remained at 16.9 years as compared to previous quarter, with public sector borrowings having a longer average term of 20.4 years compared to 7.1 years for the private sector. This means that FX requirements for debt payments are still well spread out and, thus, manageable.
